IMAX Making Strides Overseas
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IMAX's Big Deal in China
IMAX (NYSE: IMAX) has been bringing Hollywood movies to the big screen since Apollo 13 in 2002. In 2009 they signed a deal with China's Huayi Bros. to bring Chinese movies to the big screen in China. Their first release was in 2010 with Aftershock, which grossed $640,000 on only 12 screens. Last week IMAX and Huayi Bros. expanded their agreement to bring 4 additional movies to IMAX screens in China.
Since Aftershock's release in 2010 IMAX has made many strides in China. In 2011 IMAX and Wanda Cinemas signed a deal to open 75 theaters in China. IMAX's last release of a Chinese film was Bona Film Group's (NASDAQ: BONA) Flying Swords of Dragon Gate which opened in 61 IMAX theaters with an opening weekend of $2.5 million. Flying Swords went on to gross over $10 million in China.
Now China is IMAX's second biggest market with 97 commercial theaters as of June 30th and another 131 theaters scheduled to be open by 2017. China's box office is projected to grow from $2.06 billion in 2011 to $3 billion 2012. China is now the world's second largest market. By 2020 China is projected to overtake North America as the largest market in the world.
Not only is IMAX focusing on expanding the number of screens in China, but also the number of films shown on those screens. Since China only allows US 34 films to be imported each year, deals such as the ones with BONA and Huayi Bros. should help IMAX fill their slate with new releases.
IMAX in India
Right now IMAX only has 3 theaters open in India, and another 11 under contract. IMAX has aggressive plans to have 50 screens in India by 2015. India is another blockbuster market for IMAX. In 2011 India had $1.4 billion in box office receipts, making it the 4th largest market in the world. Recent projections estimate that India's film industry will grow to $5 billion as soon as 2014. This presents a huge growth opportunity for IMAX.
Unfortunately, India is a much more challenging market for IMAX since 85-90% of tickets sold are to Bollywood movies. In order to gain traction in the Indian market IMAX signed a deal with India's Yash Raj Films to bring Dhoom 3 to IMAX in India in 2013 to start bringing Bollywood movies to their IMAX theaters. IMAX is also planning on rolling out Bollywood movies to other international markets in the future.
IMAX Moving Forward
Moving Forward IMAX sees the majority of their growth coming from markets outside of the US and Canada. IMAX estimates that the North American market is 55-60% penetrated, but the rest of the world is only 20% penetrated, leaving plenty of growth for IMAX around the world. By IMAX projects they have the opportunity to open 800-900 theaters outside of North America.
China and India are not the only 2 international markets that IMAX is pushing into. IMAX currently has theaters in 52 countries around the world. Though none of these markets are as big for IMAX as China or India, IMAX continues to work with film studios to bring foreign movies to the IMAX screen. IMAX agreed to release foreign movies on the IMAX screen over the past year in Russia, South Korea, and France. They are also continuing to work with film studios around the world to bring more movies to their screens, and have opened a new studio to digitally re-master films to their IMAX format.
Looking to the Future
IMAX has a history of producing superior sales at their theaters which provide high margin recurring revenues for the company. As IMAX expands their network they are projecting that their margins will grow due to a higher mix of these recurring revenues. Given IMAX's growth prospects overseas and a higher mix of recurring revenues from these theaters, I'm betting IMAX will beat the market over the next 5 years.
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